The Markets April 11, 2007

Advisers Have Faith in International Equities

Nearly half (43%) of advisers believe that international investing continues to offer the best opportunities for portfolio diversification, although they say that correlations are increasing across the globe.
Reported by
When selecting an international mutual fund, advisers equally use broader based strategies and more finely segmented asset classes according to Financial Research Corporation’s (FRC) “Adviser Views on International Investing’ survey. FRC’s research shows that manager tenure is an adviser’s single most important consideration in selecting an international product. However, advisers employed by an independent firm or an RIA tend to screen all products on the platform against their own criteria before making a fund selection, FRC said.
When it comes to allocation, advisers say that 21%-30% of the assets of a typical 40 year-old 401(k) investor should be invested in international products, according to one of many cuts of adviser survey data, FRC reported in a news release about the survey, which examines the international fund space and details types of products, services, and support advisers value when assessing international products.
“The largest percentage of advisers wish manufacturers would focus on structures that reduce the cost of international investing, such as developing core & satellite products with a passive portfolio at the core,’ according to Owen Concannon, FRC’s senior research analyst and subject matter expert.
In addition to examining advisers’ opinions of international mutual funds, FRC reviewed what it considered “the most reputable international fund managers’ against the changes in product usage noted by advisers in its FRC’s World of Opportunity in International Funds study that tracks changes in adviser usage of international products. The largest allocators, those with more than 20% invested in international products, FRC reported, were fee-based and were on average, the highest revenue producers. Aside from American Funds, the most mentioned fund managers that were unique to this group included Thornburg and DFA.

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